MW A new world order is redirecting capital from the U.S. toward Europe, says Goldman Sachs' former commodity chief

By Jules Rimmer

The global framework set in place at the end of World War II is being dismantled and the U.S. is retreating from the world stage. This will trigger a strategic shift in capital allocation, away from the high tech, "asset-light" sectors of the U.S. in favor of the "asset-heavy" defense and infrastructure sectors in Europe.

This is the opinion of Jeff Currie, chief strategy officer of Energy Pathways at Carlyle Group, who argues that "desperation is the mother of innovation." Europe's response to its security concerns with a huge buildup in military spending financed by the release of the German debt brake will attract capital and create an investment boom, he believes.

The U.S. meanwhile will need to figure out who is going to buy its debt. "And as the U.S. retreats, it brings all of these into play, and I like to call it bonds, barrels and bombs. The bonds of the dollar, the barrels are the oil, and the bombs are the U.S .military, all three of these are under pressure," he writes.

In a June 18 interview with Erik Townsend of Macro Voices, Currie crystallized his argument by noting how German bunds BX:TMBMKDE-10Y barely flinched when Europe announced a trillion-dollar spending package. "The U.S. attempts to pass a new budget and the 30-year yield BX:TMUBMUSD30Y soared above 5%".

Writing for Carlyle on Wednesday, Currie contended that the world is becoming more dangerous and expensive with trade routes, supply chains and economic alliances under threat. He believes Europe can be the main beneficiary of this newly-fraught world order, because it's now ready to re-emphasize its defense and as cooperation with America declines, will boost spending on defense, infrastructure and energy.

The scale of this investment is not yet fully discounted by markets. Whereas AI capital expenditure in the U.S. since the launch of ChatGPT in November 2022 has totaled $500 billion, Europe has already announced EUR1.5 trillion in new defense-related spending and over that time frame the German DAX DAX has outperformed the S&P 500 SPX by 20%, observed Currie.

Contemplating the decline in the dollar and sentiment toward it, Currie points out that in the last decade European capital has flooded into the U.S. supporting the country's tech investment and funding its deficit. Reversing that investment trend is key to Europe's financing needs.

Currie observes that military spending is a crucial component of financial and technological innovation , noting that Israel's and South Korea's world-leading research and development spending is mostly attributable to countries sitting on their borders. It's no wonder, he stresses, that Poland has the best performing economy and stock market PL:WIG20 in Europe right now as its military spending is ratcheted up to 5% of GDP. He writes that "the American military and private capital were midwives to Silicon Valley, the internet and AI."

He says this capital rotation will be accentuated by the decline in the marginal buyer of U.S. Treasurys with China, Taiwan and Japan no longer recycling their trade surpluses into U.S. bonds and Germany now competing for capital. "Who is going to buy these bonds?" he asks.

Currie concludes that "Europe's bond markets are signaling a confidence in its domestic affairs that was historically only reserved for America, with its exorbitant privilege." This latter no longer applies.

-Jules Rimmer

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June 20, 2025 10:32 ET (14:32 GMT)

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